CEO Agrees With UAW That Two-Tier Wage System Should Be Replaced

Fiat Chrysler Automobiles
NV Chief Executive
Sergio Marchionne
said on Wednesday he wants to replace the two-tier wage structure for hourly workers at the auto maker's U.S. factories and is willing to start discussions immediately with the United Auto Workers union.

"We've got to get rid of this dichotomy. It's the wrong answer. I don't have two classes of citizens in my shops. It doesn't work," Mr. Marchionne said during an appearance at the Brookings Institution in Washington, D.C., where he discussed the legacy of the 2009 federal bailouts of the former Chrysler Group LLC and
General Motors Co.
GM -1.41%

Instead, Mr. Marchionne said, UAW workers at Fiat Chrysler's U.S. plants should have a variable pay agreement that allows workers to get paid more when the company prospers, but "share the pain" when times are tough. Mr. Marchionne said he would propose allowing veteran workers currently earning the higher $28-an-hour wage level to keep their pay packages.

The UAW and the Detroit Three auto makers—GM,
Ford Motor Co.
and Chrysler—are scheduled to negotiate a new master agreement starting in 2015, replacing a contract pattern negotiated in 2011 in the shadow of the industry's 2008-09 collapse. As part of the current contract, newly hired UAW workers start at an entry level wage of $15.78 an hour.

UAW leaders have signaled that changing the two-tier wage structure is a priority for them. The current system results in workers performing the same jobs in the same plant earning substantially different base wages. Before the restructuring of union contracts that resulted from the 2009 bailouts, the UAW typically fought to keep base wages the same for all workers in similar job categories.

Mr. Marchionne said he believes the UAW's culture has changed "totally" since the bailout. But he cautioned that the union should be cautious about seeking new "entitlements…without having a proper understanding of what's earned."

UAW members are scheduled to elect a new president at a convention in early June.
Dennis Williams,
currently the union's secretary-treasurer, is expected to win the vote and lead the union through the 2015 talks with the Detroit Three auto makers.